Crypto Spread Trading with Cross Pairs and Futures Calendars
Summary
The document introduces spread trading as taking a long position in one asset and a short position in another, aiming to trade their relative performance. It applies this idea to crypto cross pairs, where one cryptocurrency is priced against another, and to futures. It distinguishes spreads between different assets, such as perpetual contracts, from calendar spreads that pair futures on the same asset with different maturities. A BTC example illustrates buying a nearer contract and selling a later one when expecting relative underperformance across periods.
The article argues that correlated crypto assets can make relative-value trades less dependent on the market’s overall direction, and it outlines a manual workflow: chart the ratio or spread, set exit levels, open both legs, then close them together. It also notes practical risks, including low liquidity in less popular pairs and the difficulty of managing two orders simultaneously. Its claims that spreads are low-risk or trend more clearly are not supported with backtests, costs, or risk measurements; hedging reduces some directional exposure but does not remove spread, execution, leverage, or liquidity risk.
Key ideas
- A spread trade pairs a long position with a short position to target relative performance.
- Crypto spreads can pair different assets or futures contracts with different maturities.
- A calendar spread expresses a view on how the price difference between expiries will change.
- Paired positions can reduce broad market direction exposure, but do not eliminate trading risk.
- Liquidity and simultaneous execution of both legs are important practical concerns.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.